Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

The concept of budgetary accounting is focused on monitoring and tracking financial commitments and obligations. This type of accounting involves the systematic recording of budgeted revenues and expenditures to ensure that an organization adheres to its financial plans. It encompasses the processes that allow entities to compare actual spending against the approved budget and to track any variances. This is crucial for effective financial management because it ensures that resources are allocated appropriately and helps to prevent overspending or misallocation of funds.

In budgetary accounting, commitments are recorded when an obligation is entered into, such as contracts or purchase orders, allowing organizations to keep a close eye on their budget limits and financial obligations. It is this proactive monitoring of financial commitments that distinguishes budgetary accounting from other forms of accounting.

For example, while fund accounting is more focused on tracking resources and ensuring they are used according to specific restrictions, it does not emphasize the ongoing tracking of obligations in the same way as budgetary accounting. Similarly, audit accounting is primarily concerned with examining and verifying the accuracy of financial statements after transactions have occurred, while capital accounting relates to the management of a company's long-term assets and liabilities rather than day-to-day financial commitments.